From: Boob 
Newsgroups: misc.invest.real-estate
Subject: Re: Prime Rate
Date: Fri, 09 Apr 2004 05:33:57 GMT

John Wheeler wrote:
 >  I am applying for HELOC and some lenders are willing to lend 
 >  at the prime rate, minimal closing costs, 0 points... I asked 
 >  a friend why they are willing to do this since they don't make 
 >  any  money 

I can't tell where you got the silly notion that "they don't make
any money" lending at the prime rate.  Doesn't matter.  They do.
Humongous bunches of money these days with prudent savers and
investors being forced by Greedspan's criminal rampage to lend
money to *them* at one or one and a fraction percent per annum,
wildly below the current rate of inflation.  Prime rate always
has been a profitable lending rate, currently wildly profitable.

 >  and he said he didn't know, but it might be because they 
 >  want to gain customer loyalty. Does this jivE? Other motives 
 >  maybe?

In a way, the "customer loyalty" theory sort of holds together in
the sense that in a *rising* interest environment, what you all
but inevitably face in the near future, you're gonna be stuck as
a two wheel drive in quicksand with that loan at prime.  Prime is
a *floating* rate.  It goes Up UP and *UP!* when interest rates
are rising in the general market.  Doesn't even necessarily take
any time about moving on up (against your theory of having gotten
a "bargain").
    Now, when fixed rate borrowing is the only kind you should 
reasonably be considering, in your own interests, you're talking 
about going into one of the wildest of the floating rates.  To 
add misery to insult, you're going to find it extremely difficult 
to refi in the rising interest rate market as it unfolds.  "Let's 
see if we can get some more floating rate paper onto the books 
before rates start ratcheting up" is the game being played.  You 
want to play, okay it's your future, but don't delude yourself 
that prime is any bargain under these conditions.
    Boob    :-)##


Have you covered your nut yet this year?  If not, may I suggest
researching http://www.sec.gov/edgar/searchedgar/companysearch.html
instead of listening to hypists in misc.invest.stocks?  If you wish
to email me go to http://home.earthlink.net/~bgrumbin